State Bailout to Rescue Financially Troubled Newark School District

Published: January 15, 2000

When the New Jersey Department of Education took control of Newark schools in 1995, one goal was to improve the district's troubled finances. Five years later, the state still runs the district, which faces a $58 million deficit that accumulated under the former state-appointed superintendent.

Now the department has put together a bailout package that will prevent Newark from having to lay off teachers or cut programs during this school year. The package provides $37 million more in aid than was originally allocated, shifting $10 million from districts with surpluses, forgiving $5 million of its debt to the state and increasing the district's per-pupil aid allocation by $5.3 million to account for additional enrollees. The plan was reported yesterday in The Star-Ledger of Newark.

Michael Azzara, the department's assistant commissioner for finance, said the problem would continue into the next school year, when he projected that Newark would need about $40 million above normal aid levels. The district, the state's largest, with more than 45,000 students, has a budget of $581 million this year.

Mr. Azzara said the deficit was caused in part by overspending and sloppy bookkeeping under the former superintendent, Dr. Beverly Hall, who was appointed in 1995 as the first superintendent under the state takeover. She left in June to become the superintendent of Atlanta's public schools, and has been mentioned by New York City Board of Education officials as a possible replacement for the former schools chancellor, Rudy Crew.

Dr. Hall was not available for comment, said her spokeswoman, Carla Murphy. But in a statement, Dr. Hall said she warned the state last spring of a projected deficit of $100 million for next year, which she said was because of costs mandated by the State Supreme Court and a shortage of state aid.

She said she had cooperated with the state, but did not respond to the state's charges of overspending.

Mr. Azzara said the district's financial problems became evident in October, when an audit of the 1997-98 school year arrived at the Department of Education, 11 months late. The budget the district had presented for state review before the school year had been balanced, Mr. Azzara said. But the audit revealed that the district had spent $8 million more than it took in.

''The budget that they submitted appeared to be headed in the direction that everybody wanted them to, but they were spending differently,'' Mr. Azzara said.

An audit of the 1998-99 school year has not been completed, Mr. Azzara said, but overspending appears to have continued by about $9 million. That, he said, combined with a projected revenue shortfall of $41 million for 1999-2000 operating costs, produced the $58 million deficit.

Dr. Hall's replacement, Marion Bolden, a former assistant superintendent in Newark, said she had hoped to focus on curriculum issues, but that the budget problem would occupy most of her time.